Gold prices experienced a significant drop of over 3% following the announcement of the presidential election results, resulting in cumulative losses exceeding 5% from late October to the recent low. However, the situation does not appear to be catastrophic. On Thursday, the price saw a recovery of 2.5% from the lows to the high intraday, almost fully recuperating from the previous day’s decline.
In terms of technical analysis, gold found support just below $2650 in the form of the 50-day moving average. This correction helped alleviate the overbought conditions that had been building up over the past three months of gains. Despite the positive rebound on Thursday, experts are skeptical about further gains in the upcoming weeks. The recovery on Thursday is believed to be a result of gold bugs trying to take advantage of the general pullback in risk assets, coupled with a temporary decline in the dollar.
There is a possibility of a more significant decline in gold prices, correcting more than 50% of the rise from the lows of last October. The recent return of the RSI on weekly timeframes from extreme overbought conditions with values above 80 confirms the start of a corrective movement. The strengthening of the dollar could further accelerate this global correction, posing challenges for precious metals even without it.
Looking at the stages of decline, experts point out several key levels to watch. A consolidation under $2640 would signify a break of support from the 50-day moving average and a deeper correction below the 61.8% retracement from the August lows. The next phase of decline could potentially see prices correcting towards the $2400 area, where the 200-day moving average and the starting point of the last growth phase are situated.
Taking a more long-term view, there is a possibility of a significant price pullback towards the $2000 area. In such a scenario, the previous highs could act as a major support level. While a sharp return to growth could signal the imminent renewal of historical highs, experts believe that it is more likely for gold to relinquish its top role for the time being.
In conclusion, the gold market is facing a period of potential corrections and challenges, with a focus on key support levels and the overall global economic landscape. Traders and investors are advised to stay vigilant and monitor the market closely for any further developments.
